The power of purchasing to drive a sustainable economy

To really improve sustainability, companies must look beyond their own in-house activities. On average, a company’s supply chain accounts for 5.5 times as many greenhouse gas emissions as its own operations. These figures come from a new global supply chain report called ‘Cascading commitments: Driving upstream action through supply chain engagement’ by CDP.

Formerly known as the Carbon Disclosure Project, CDP runs a global disclosure system that enables companies, cities, states and regions to measure and manage their environmental impacts. When it started ten years ago, 19 corporations began to drive action across their supply chains. Now, following a decade of campaigning by CDP, there are 115 organizations involved – wielding a combined purchasing power in excess of US$3.3 trillion between them – and 5,500 suppliers.

By asking their suppliers to disclose, measure and act on their environmental impact, companies are able to leverage their purchasing power to drive down emissions, improve water security and end deforestation throughout the supply chain. According to CDP’s global supply chain report, suppliers reported a total reduction in annual emissions of 633 million tonnes of carbon dioxide last year, which equated to a collective cost saving of US$19.3 billion.

Some companies are also taking the first steps on deforestation and water security risks, but lack of governance remains a barrier to further action. However, only 57% of suppliers reported emissions reduction activities, just 35% have a structured carbon reduction target and a mere 3% of targets are in line with what the science says is necessary. With major purchasers now increasingly deselecting suppliers based on their environmental performance, there is growing pressure for suppliers to act sustainably in order to avoid an impact on their bottom line.

Supplier Engagement Rating

CDP has developed a Supplier Engagement Rating to evaluate responding companies on their supplier engagement performance across four key areas: governance, targets, emissions and value chain engagement. The Supplier Engagement Leaderboard lists more than 120 companies, including many leading names in biotech/healthcare, food & beverage/hospitality, manufacturing, transportation and materials.

Paul Simpson, Chief Executive Officer of CDP, states: “The lesson from a decade of the CDP Supply Chain programme is that large public and private-sector organizations really can lead effective change through using their substantial procurement spend as a powerful lever for action. If others can follow their example, and suppliers continue to cascade good practices and commitments further down the supply chain, this can play a huge role in the rapid transition to a sustainable, low carbon economy.”